Friday, January 31, 2014

It was a day to celebrate for the RNAi Therapeutics sector. Following years of starvation and neglect,
the going public of a private RNAi company marks another milestone in the
technology’s recovery and vindicates activities in the early VC rounds seen last
year (e.g. Solstice and Arcturus; correction: as rightly noted by Arcturus, the source of Arcturus' early-stage funding was not classical VC funding). This is
because venture investing in biotech really only pays
off when the exit is on the public market- and very rarely by means of Big Pharma
takeovers.

Sorry Bruce, but planning your
company’s on the assumption that they will be Big Pharma takeover targets is
flawed as you are dealing with miser companies failing to see the Big picture
for their discounted cash flow obsession. And how can you trust a counterpart which for years have refused to pay small biotechs based on the value of their discoveries and instead preyed on their need of capital, only to cry foul now that the public markets provide a more attractive alternative source of capital to them.

The bullish
view: potential

The $700M
market cap for a preclinical-stage company, however, does raise some legitimate
questions. Supporting such a valuation
is the realization that this is a platform company and that once it has
clinically relevant delivery figured out, it can roll out an Alnylam-type broad
pipeline in a short period of time. Or
think of a pipeline with not just one Alexion-type drug (one-rare-orphan-drug wonder with a >$30B market cap), but a handful of those. Thus,
valuing the company merely based on the number of development products and
their development stages would be woefully short-sighted.

It is obviously
a mistake to apply the same risk discount based on the stage of development regardless
of technology and drug target. Hence,
once delivery is validated (e.g. through extensive non-human primate
experience), you should significantly increase your valuation of an RNAi
Therapeutics company that wisely seeks to minimize target risk by taking
advantage of RNAi to choose from a plethora of targets. And under such circumstances when capital and
not technology becomes limiting, a capital raise should even increase
shareholder value and not be viewed as shareholder dilution.

So if you
speculate that Dicerna will have a TTR amyloidosis-type program and will have
generated impressive proof-of-concept knockdown in a clinical study by the end
of 2015, a $700M market cap would seem acceptable if not on the low end.

The
bearish view: limited de-risking and relative valuation

On the other
hand, it seems easy to challenge the view that Dicerna has fulfilled a key
criteria for the $700M valuation: clinical de-risking.

By clinical de-risking, I do not even mean SNALP-type gene knockdown results in humans (e.g. >90% with ALN-TTR02). By that criterion, an Arrowhead Research,
with a market cap similar to Dicerna, would fail the test, too.
However, ARWR's valuation is supported by solid non-human primate efficacy data and human safety
data, plus Arrowhead is leading the way in the important area of ligand-targeted polyconjugates (for more on my view on Arrowhead Research and much more,
please consult the RNAi Therapeutics Investment Guide 2014).

By contrast,
the degree of validation of Dicerna’s delivery system is essentially limited to rodents,
although I expect them to have collected at least some non-human primate safety data as they are about to enter clinical development in the first half of 2014. Non-human primate data is required in RNAi
Therapeutics as it has been shown again and again that rodent data often do not
translate into humans.

Accordingly, it can be argued that Dicerna’s lipid-based (Encore) delivery system will be at a similar
stage to that of Tekmira’s lipid-based (SNALP) delivery technology 5 years ago. As Tekmira’s (TKM-ApoB) experience with SNALP illustrates, there can be time-consuming lessons to be learned before a suitable formulation
and administration solution are found. On top of that, Tekmira controls some fundamental patents covering Encore delivery technology (Semple/Wheeler), although their expiration date is certainly approaching fast.

In terms of
pipeline strategy, Dicerna and Tekmira are also not all that different either, both of
them pursuing indications targeting gene expression in the liver and cancer, with an increasing focus on
orphan diseases. In all respects,
Tekmira can be considered more advanced although RNAi companies do not like to talk about their specific orphan indications for competitive reasons.

The analysis
thus far has shown that the overall strategies of Dicerna and Tekmira are quite
similar, but Tekmira is (much) more advanced in practical terms.

One obvious
difference between the companies is the nature of the RNAi triggers
employed. As the name Dice-RNA implies,
the company was built on the Dicer-substrate technology that was once pushed by some to be superior in terms of knockdown potency to other RNAi
triggers. I believe I can safely say
that most would agree that this is not the case and that the main advantage of Dicer-substrates may be in conjunction with certain conjugation strategies.

The argument
that Dicer-substrate RNAi triggers are commercially so valuable because they
are the only alternative to Alnylam’s RNAi trigger IP, is also outdated. This is because Alnylam has lost its standing
in RNAi trigger IP and there have been other developments, such as the issuance of the Baulcombe patents that showed that Dicerna does not have the
automatic freedom-to-operate when it comes to its RNAi triggers.

In an
intriguing twist of events, the IPO document (S1) filed by Dicerna with the SEC describes
how the fact that Alnylam has acquired the RNAi assets of Merck unexpectedly could have a chilling effect over business development efforts involving Europe. This is because the opposition has relied on Merck to do the heavy lifting in revoking Kreutzer-Limmer once and forever. It teaches me to never count Alnylam out as they seem to have always one more Machiavellian move up their sleeves. And it should hardly surprise you that (according to the S1), yes, Dicerna in 2010 also
received a not-so-friendly reminder from Alnylam’s lawyers that it does not
have freedom-to-operate.

In addition, as I had observed before, the S1 also describes that Dicerna is not the only one with access to the fundamental Dicer-substrate RNAi trigger IP licensed from the City of Hope, but that Arrowhead Research enjoys similar access. If Arrowhead Research wanted to hurt Dicerna as a competitor, it could frivolously sub-license the Dicer-substrate IP and thus destroy its scarcity value. By contrast,
Tekmira can play it safe by utilizing the Alnylam-type RNAi triggers to which
it has access in addition to usiRNAi triggers which appear to be a simple and cheap way
to get around all of the otherwise fundamental RNAi trigger IP.

So what is
left to justify the $250M vs $700M market cap difference between Tekmira and
Dicerna? Not much since Tekmira’s relationships
with regard to Ebola, ALN-TTR02, Monsanto, and Alnylam (and quite likely more to
come...mRNA), easily outweigh the Kyowa Hakko relationship of Dicerna.

So yes, to
come to the point of this blog entry, if you like DRNA, you should love TKMR (which, of course, I own and
selfishly choose to promote).

Wednesday, January 29, 2014

After Roche and ISIS Pharmaceuticals announced last April that a co-development effort to apply Roche’s Brain Shuttle technology for the
systemic delivery of antisense oligos would form part of their Huntington’s collaboration,
I started to pay some attention to this technology. This is because despite the already enormous
promise of Oligonucleotide Therapeutics for CNS disorders (think of all the neurodegenerative
diseases) with the direct administration of single-stranded oligonucleotides into the CNS,
its value could be further enhanced with a systemic delivery approach such as
the Brain Shuttle tech.

This is not only because intravenous administration methods
would be preferable over the more invasive direct intra-CNS
injections/infusions, but also because a systemic delivery approach promises a
more uniform drug distribution and would minimize the importance of diffusion. It
is the limited diffusion of current RNAi delivery techs that is holding back
RNAi Therapeutics in this important therapeutic area.

The fundamental principle behind Brain Shuttle is actually not that novel at
all. Companies like Armagen have long attempted to target receptors such as the
insulin receptor and the transferrin receptor on brain capillary endothelial
cells as in normal physiology these receptors function to shuttle
transferrin/iron and insulin across the notoriously recalcitrant blood-brain-barrier.

Based on newly published data by Roche scientists (Niewoehner et al. 2014), a conventional antibody approach does not work. To wit, a conventional antibody consists of
two binding sites (divalent) and such engagement apparently causes receptor trafficking to be
re-directed to the degradative lysosome compartment of the brain endothelial
cells, at least in the case of the transferrin receptor tested. By contrast, when receptor targeting occurs
via monovalent interaction, the normal receptor physiology, including
transcytosis, is maintained. Using this
strategy, it was shown that the intra-parenchymal delivery, i.e. delivery into the brain proper, of an antibody
against beta-amyloid (related to Alzheimer’s disease) that had been tethered to the
monovalent transferrin receptor antibody was enhanced on the order of 50-fold.

The way how this research can be translated into RNAi Therapeutics is to simply append an RNAi trigger instead of the beta-amyloid antibody to the transferrin receptor antibody. Or you could do away with
proteins altogether and replace the transferrin receptor antibody with an
aptamer-RNAi trigger combo (e.g. a Dicer-substrate in the spirit of tomorrows IPO by Dicerna Pharmaceuticals). Hence, the irony of the ISIS-Roche delivery
collaboration is that ISIS could- to put it just slightly hyperbolically- be shoveling
its own grave by eroding the current advantage of phosphorothioate antisense
over RNAi for gene knockdown in the CNS.

Tuesday, January 28, 2014

In early
December, RXi reported phase I data from new cohorts that were added to the multi-dose
study of RXI-109 in dermal scarring.
Accordingly, by increasing the dose to 10mg self-delivering RNAi trigger
from previously 7.5mg per injection site, the company was now able to achieve a 50% target CTGF gene knockdown (5 and 7.5mgs: 43%).

Based on the
meager 30-40% knockdowns and apparent efficacy that were observed in comparable clinical studies targeting the same CTGF with a phosphorotioated antisense compound at 5mg per cm
scarline­, the prospects of RXI-109 would suddenly
appear to be much brighter. Of course,
the ISIS compound was spun out into Excaliard which was then acquired by Pfizer in late 2011 for the apparently promising data observed with the dermal scarring candidate
EXC001. EXC001 is now in late-stage clinical development.

Of course,
there are a number of caveats with this reasoning. For one, although the study protocols appear
very similar, it is possible that the tissue biopsies taken to obtain the CTGF
knockdown measures were of dissimilar sizes.
Given that CTGF knockdown can be expected to wane quickly away from the
injection site, such differences could have a material effect on the apparent
knockdown efficacy.

On the
darker side, when you consider a nice visual therapeutic effect (see picture)
in light of a 30-40% knockdown, you start to wonder whether the actual effect
on scarring was less due to blunting of CTGF expression and more due to some
non-specific immune-related effect of the phosphorothioate backbone in the
antisense compound. The RXI-109 compound
may not ‘benefit’ from such an effect.

Nevertheless,
the 10mg dose results are a step forward and form a useful basis for the phase
II studies that RXi Pharmaceuticals will be rolling out this year in lower
abdominal scar revision (already initiated), keloid scar revision, and scar
revision following cosmetic breast surgery.

Unfortunately, prospects would have been even brighter had the company
employed a more potent RNAi trigger design.
And when the CEO, in 2014, still shows a slide with Kreutzer-Limmer controlling
dsRNA lengths of 15bp and over (to justify the use of dsRNA < 15bp), I would
suggest they update their presentation slides.
Similarly, it would be honest to not talk about a market cap of $50M,
but to present their more meaningful capital structure, including preferreds
and the like.

Sunday, January 26, 2014

After having
shown for some time now deep and long-lasting gene knockdown in lung endothelial
cells, Silence Therapeutics has finally published (Fehring et al. 2014) more
detailed chemical and pharmacokinetic information on the DACC formulation. This
formulation could be useful for indications such as cancer involving the lung
and acute lung injury.

Chemistry: cholesterol replaces helper phospholipid DPhyPE

Atuplex has long been the workhorse delivery technology of Silence Therapeutics. Atuplex has been
shown to target pretty much all vascular endothelial cells independent of tissue/organ
system and enables the company's lead candidate, Atu027 for the prevention of cancer metastasis currently in phase Ib/IIa in combination with gemcitabine in pancreatic cancer. Unlike the four-lipid
formulation pioneered by Tekmira, Atuplex consists of just three lipids:

To my
surprise, the DACC formulation contains the same cationic and pegylated lipids
as Atuplex. The main difference is in
replacing the helper phospholipid DPhyPE with another helper lipid, in this case
cholesterol. With this change (and some
adjustments in the lipid ratios), 40% of the DACC ends up in the lung with the
concomitant silencing of genes in resident endothelial cells.

Silence
Therapeutics’ strategy of utilizing a given cationic lipid in new lipid
combinations therefore stands in contrast to previous efforts by the likes of
Tekmira and Dicerna which have focused on the discovery of new
cationic lipids to increase potency and the therapeutic index.

Rationale of DACC over Atuplex for lung endothelial RNAi not fleshed
out

Although the
new research clearly shows that the lung is the most important physical sink for DACC, the
study did not investigate whether this translates into a tissue-specific
knockdown effect as well [correction 28Jan14: Figure 4 of the paper does show preferential knockdown in endothelial cells of the lung versus other tissues]. This would be an important additional safety-related rationale for using DACC over
Atuplex for lung endothelial gene knockdown, especially for target genes that might have critical functions in normal physiology as well.

Atuplex, in contrast, has previously been shown to mediate lung endothelial gene knockdown,
not just in mice (as DACC in this study), but also non-human primates. What is more, the previous Atuplex studies
showed comparable (~70-80%) knockdowns at ~10-fold reduced dosages (0.3mg/kg vs 2.8mg/kg). It will
therefore be important to test whether lower dosages are feasible for DACC
knockdown in non-human primates, potentially with the use of slow infusions
instead of bolus injections as was the preferred method in the present study. And as is my pet peeve when it comes to
Silence’s delivery technologies, why not attempt them with other, non-AtuRNAi trigger
technologies when a factor of 2 could make all the difference in whether you
have an acceptable therapeutic window or not.

It should be
noted, however, that unlike Atuplex, DACC appears to have a more reliable
dose-response and seems to be tolerated at up to 6mg/kg so I trust that Silence
has good reasons for choosing DACC for programs such as acute
lung injuries (ALI). Based on the data revealed by the company thus far, it
appears that the ALI candidate Atu111 is the prime candidate to be Silence's next clinical development candidate.

Sunday, January 12, 2014

I have expected RNAi Therapeutics business development activities this January, but I have
to admit that when these deals are actually announced it gives me an adrenaline
rush each time. For $175M plus some
milestones and royalties, it was announced a few hours ago that Alnylam will acquire the RNAi assets from Merck. Merck had just undergone a corporate re-organization that I had speculated could spell the
end of Merck’s RNAi Therapeutics platform development efforts, especially since
protein guy Roger Perlmutter replaced RNAi supporter Peter Kim as Merck’s head
of R&D (Merck’s RNA(i) Therapeutics
Unit on the Chopping Block). That's how it sometimes works, no complex science, just tastes and egos.

In addition
to cultural issues, the transaction also solves the problems that the bean
counters in Big Pharma face when justifying investments in emerging
technologies. How e.g. do you take into
account that much of the value of a platform technology could be outside of your
core areas of therapeutic interest? Who
e.g. would have predicted that TTR amyloidosis and HBV would materialize as the
two commercially most attractive near-term opportunities when Merck acquired
Sirna Therapeutics in 2006? As an added
sweetener for the bean counters, the write-off will allow Merck to exceed
financial guidance in one of the coming quarters.

The $175M price
tag has two important implications. Firstly,
for a biotech company the size of Alnylam, putting that much into the acquisition of largely IP is a vote of high confidence in RNAi Therapeutics. This is in sharp contrast to the days when
Alnylam made deals with Roche and Takeda and must have felt as if they made out
like bandits by selling IP of uncertain value given the questions around
Alnylam’s access to delivery at the time.

Secondly,
the $175M indicates that there was competitive bidding going on for the assets,
most likely by other Big Pharma companies.
In fact, I had suggested to some of the other RNAi companies to take a
look at the assets in the hope of another Roche-Arrowhead-like 'steal
of the century'. The fact that Alnylam won out is likely explained by Merck being the best strategic fit for Alnylam whereas other Big Pharmas may be better off in getting unfettered access to RNAi Therapeutics via the likes of Tekmira and Arrowhead Research as Merck's RNAi assets, by largely copying the efforts of others, always seemed to overlap with others (except for modification chemistry)

So what will
the $175M get Alnylam? The most valuable
aspect to Alnylam should be Merck’s development efforts in polyconjugate
technology where Merck has been copying Arrowhead’s efforts. Thus, instead of spending something like $1B,
likely the current acquisition value of Arrowhead Research, it was able to get
access to a similar technology for much less.
Although Merck also pursued liposomal delivery, since Alnylam already has access
to Tekmira’s technology, the add-on value of Merck’s liposomes to Alnylam is
more limited. Finally in terms of
technology, Merck has conducted a deep screening of nucleic acid modifications
which can now be incorporated into Alnylam’s RNAi trigger discovery and
conjugate development efforts.

Another
important aspect to Alnylam will be safe-guarding the value of the Tuschl II IP. Merck got uncontested access, including sublicensing rights, as part of a legal settlement between the two companies in 2011. Tuschl II is still an
important asset to Alnylam and in a worst-case scenario, Merck’s disposition
of their RNAi assets would have meant giving away access to Tuschl II to various
competitors.

Genzyme
Buys into RNAi Therapeutics Big Time

The Merck
technology acquisition will be funded by the $700M investment of Genzyme into new
Alnylam stock at a 25% premium to current trading (~12% of the company) plus
additional associated biotech goodies to come (correction: only $25M of Merck's $175M was in cash, $150M in shares).

I know that
I am starting to come across like a know-it-all, but this transaction did not come
all that surprising to me, too. Importantly, 3-4 years ago Alnylam started to lease out significant lab space to Genzyme in Cambridge, Mass. This seemed odd to me since
Alnylam was not in the business of dressing up its financials by moonlighting
as a landlord. Surely, something more strategic
was going on here.

When a little more than a year ago, Genzyme took the Asian rights to ALN-TTR02, it seemed a bit of a
downer. In retrospect, however, it is apparent that Genzyme took that license as a starter before more validation of the
technology in the form of phase II results with ALN-TTR02 and phase I results
with ALN-TTRsc would trigger a more expansive deal like the one today. Specifically, today's deal gives Genzyme Sanofi-Aventis limited commercialization rights to at least 3 additional Alnylam drug candidates in the
orphan drug space.

And finally,
attention Big Pharma bean counters, a lesson of that transaction is that all you need to do to financially justify
investments in RNAi Therapeutics is to create a line item called ‘orphan drugs’
and account for RNAi Therapeutics under that label.

Friday, January 10, 2014

News this week of Roche licensing antisense technology from Santaris 3 years after having
written down a related $500M+ investment in RNAi Therapeutics, is symptomatic
for the apparent panic and resulting schizophrenic behavior that grips Big Pharma
when it comes to Nucleic Acid Therapeutics (NATs). Can NATs help rekindle their flagging discovery efforts or will NAT companies leave them in the dust as they advance to the top of the Pharma food chain?

Meanwhile,
Big Biotech in the form of BiogenIdec has also recognized that NATs are
critical for their growth in the form of a partnership with Zinc Finger
Nuclease specialist Sangamo Biosciences for the treatment of red blood cell
disorders (sickle cell and beta-thalassemia). This follows significant (~$150-200M) recent investments
in ISIS’ antisense technology for diseases of the CNS and a deal with microRNA Rx company Regulus Therapeutics.

If you sit
back and consider the clinical and preclinical developments in the space (look out for the upcoming RNAi Therapeutics Investment Guide 2014), there
can be no doubt that nucleic acid therapeutics (including oligonucleotide
therapeutics) are about to materialize as the 3rd major chemical
class of drugs following small molecules and recombinant proteins. In fact, their mechanistic versatility (gene
up- and down-regulation, modulation of RNA processing etc) means that in a few
decades, there will be many more NAT-based new molecular entities than small
molecules and recombinant proteins combined, in many cases for genetically
defined patient populations.

Interestingly, in 2013, only 2 monoclonal antibody new molecular entities (NMEs) received marketing authorization by the FDA (see here).

Investors do
not have to take such a very long view as a number of commercially attractive
Oligonucleotide Therapeutics are gearing up to enter the market, including for
TTR amyloidosis, Hepatitis B infection, spinal muscular atrophy, and
hypertriglyceridemia.

For those
interested in the more particular relevance of yesterday’s deals to RNAi
Therapeutics stocks, the Roche-Santaris deal ($10M in upfront plus the usual
biobucks and royalties) represents another blow to ISIS’ claim that it owns the IP in the space, especially in light of the ongoing litigations and patent battles
between the companies and the fact that not long ago, Roche partnered with ISIS
on Huntington’s Disease. This should
provide further comfort to those, including myself, speculating that Marina
Biotech’s CRN chemistry is a valid equivalent, if not superior alternative to
the ISIS and Santaris antisense chemistries.
Regarding the deal between Sangamo and BiogenIdec ($20M upfront plus the
usual biobucks and royalties), it is a validation of the attractiveness of the
hemoglobinopathy market that forms an important part of Alnylam’s pipeline
options.

In additional RNAi Therapeutics developments...

Bad news for Benitec

In a recent paper by Lisowski et al. from Stanford (Kay lab) which appeared in Nature, very strong evidence was presented that the AAV8 serotype is far from ideal when it comes to transducing human hepatocytes. This is in contrast to preclinical results mainly in mice that have shown highly efficient, almost 100% transduction of hepatocytes, the transduction level probably needed to achieve an RNAi cure of HepC.

Based on the preclinical work, the AAV8 serotype was readily embraced by gene therapists and adopted for various liver-related clinical studies. Surprisingly, however, the data so far in hemophilia did not support a significant advantage of AAV8 over the old AAV2 workhorse.

The study by Lisowski et al. shows that this is very likely the result of poor AAV8 transduction of human hepatocytes. Among the multiple striking results, in mice with chimeric human/mouse livers, basically only the murine hepatocytes could be transduced whereas the adjacent human hepatocytes were not.

This is an unfortunate development that Benitec cannot be held responsible for. It could be a double-whammy though for the company as in addition to the commercial concerns about the HepC indication for TT-034, results from the ongoing phase I study may not even support the delivery technology for other liver applications. There is, however, light at the end of the tunnel as there are plenty new AAV serotype that appear to be as good in transducing human hepatocytes as AAV8 is in transducing murine hepatocytes.

Tuesday, January 7, 2014

Recently, I have begun to wonder whether being known as a
liposomal ‘delivery company’, a company that delivers the payloads of others,
is starting to hold back Tekmira’s valuation all the while high-quality RNAi Therapeutics
advance towards marketing approvals in the field.
Similarly, as SNALP potency has dramatically improved over the years,
particularly for gene knockdown in the liver, the effort of improving its
potency may have reached a point of limited returns (~1000-fold improvement from 2004-2009, ~3-fold improvement from 2009-now) when aggressively competing with
Alnylam, Arrowhead, and ISIS on the already available targets may be more important.

Consistent with such thinking, Tekmira this week announced a
re-organization that goes to the core of the company. Most importantly, former CSO Dr. Ian MacLachlan will cease to be in
charge of the overall scientific direction of the company. It has been his work on developing the various applications of liposomal delivery that defined the company. Instead, he will now serve as the Chief
Technology Officer with a particular focus on the development of medical
countermeasures as exemplified by Tekmira’s Ebola program which has just moved into
pivotal human safety trials. I could
imagine that with flu being an obvious target in addition to Marburg, some of
his liposomal development efforts will be spent on SNALP knockdown in
phagocytic cells and aerosolized LNPs for the respiratory epithelium.

Unclear to me is where this move leaves SNALP technology for
oncology applications where Tekmira had indicated that they made progress in
over TKM-PLK1 which is based on ~6 year-old technology. This would offer obvious
TKM-PLK1 life-cycle management and new target opportunities. Perhaps MacLachlan will be responsible for
oncology platform development as well in the form of business development
initiatives just as in mRNA and AgBio that I believe
represent exciting partnering opportunities.

The other half of the former CSO position will be filled by former Director Mike Abrams as the Chief Discovery
Officer. This move is clearly consistent
with the company’s focus on rapidly expanding its product development pipeline with 2 INDs for new candidates planned in 2014 (HBV, alcohol use disorder) on
top of TKM-PLK1 and TKM-EBOLA already in clinical development, and a series of opportunities
in the rare and orphan disease space being actively pursued.

Congratulations to Ian MacLachlan for making himself
redundant as the CSO and having the integrity to continue to serve in the best
interest of the company and shareholders.

Thursday, January 2, 2014

The New Year has barely begun and already we see evidence that
the strong capital markets interest in the RNAi Therapeutics turnaround story
will be a continuing theme this year.
This is because as the fireworks illuminated the skies, hitherto rather secretive VC-backed Dicerna
Pharmaceuticals shined some light on its workings in an S-1 filed with the SEC in preparation of an IPO that is anticipated to take place
in Q1 2014.

Although IPO intentions could have been expected based on the
funds that participated in the $60M series C this summer and the fact that the
biotech IPO window seems wide open, the S-1 makes for an intriguing read as it
suggests that Dicerna might have as well filed for bankruptcy instead of an IPO
in 2014 and the pipeline around which the company is being built.

Series C amid downsizing and bridge funding

If you do the math, i.e. taking account of the company’s
operating cash usage, the $60M Series C, and the $55M on the balance sheet as of October 2013,
Dicerna had just run out of money when the Series C happened. In fact, a $3M bridge loan had to be put into
place to keep the company operating until everything had been
properly legalized. Moreover, Dicerna’s
operating expenses had been contracting because of a reduction in activities which
you can bet means that there had been lay-offs in the 2012-early 2013 period.

Since most of the existing shareholders were able to
participate in the Series C, it seems that in addition to some employees, the
real losers on the capital side have been the small fry like company founders that
lost out big: a 1-to-250 reverse split (ouch!)
in common stock occurred in conjunction with the Series C, and even so, the
estimated valuation on August 31, 2013 was $3.42.

The latter leads me to guess that the company will attempt to
raise on the order of $30M at a $150-200M valuation giving that this would give the company a ~3
year cash runway when added to the current $50M in cash plus the increased expenses
that are part and parcel of growing your product pipeline and going into the
clinic.

Increased focus on orphan diseases

In addition to being testament to the last-minute nature by
which a number of RNAi companies were bailed out by sector clinical results and
the generally positive biotech environment, the S-1 also reflects the shift in RNAi and
indeed oligonucleotide therapeutics as a whole from cancer Hail Maries (until
now, Dicerna was only known to work on oncology candidates) to clinical candidates
in the severe orphan disease space with genetically well-validated targets and
early biomarker opportunities.

So although LNP-enabled DCR-M1711
for Myc-related cancers should go into the clinic first (2014), the orphan pipeline
is catching up fast, with a 2015 IND predicted for DCR-PH1 in primary hyperoxaluria 1.
This candidate targets glycolate oxidase with a liver-directed
LNP formulation and proof-of-concept for therapeutic effect has been obtained
in rodent models of the disease. The
incidence of this fatal disease is about 8 in a million persons based on
natural mutation rates and the fact that the only non-dietary treatment today is a dual
liver-kidney transplant…you got it, premium pricing.

Science and IP

S-1 filings also typically allow you to increase your understanding of
the competitive dynamics in a field.

As such, it should be of interest that Dicerna extensively cautioned that Arrowhead Research
through Roche has broad access to the core Dicer-substrate RNAi trigger IP from the City of Hope on which it was originally
founded (dsRNA with one blunt end and one
2nt overhang on the guide strand and a 25-30 nt sense strand). Therefore, Dicerna not only lacks exclusivity
in Dicer substrate technology (various other Dicer substrates outside of that
IP can be envisioned), it also has to share the features of the probably most
advanced Dicer substrate version with another company. One might reason that getting back exclusivity
is of greater value to Dicerna than the loss to Arrowhead if it gave up sublicensing
rights related to their access. Yes, a
deal could be a win-win here.

Another RNAi trigger-related IP issue that was raised in the S-1 was Alnylam’s
Kreutzer-Limmer patent estate in Europe, although yours truly is of the view
that the writing on that patent estate is on the wall and at most could mean
paying lawyers when the outcome seems so obvious (works well though if your
target is low on cash).

The S-1 similarly is consistent with the notion that LNPs
will be Dicerna’s preferred mode of delivery
for the near future at least. Since
Tekmira’s IP related to LNP composition of matter is very broad if you consider
what has worked scientifically in the area, patent infringement concerns might
apply.

A happy and prosperous New Year to Dicerna and
everyone else, especially those that have given RNAi Therapeutics companies a
fighting chance to establish the category as a major drug development platform
and themselves as significant, independent pharmaceutical companies.

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